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<ul class="summary-list"><li>China's stock markets surged this week, marking the best weekly performance since late 2008.</li><li>The rally was driven by Beijing's aggressive stimulus measures to boost the struggling economy.</li></ul>China's stock markets closed sharply higher Friday, notching their best week in 16 years as investors joined the rally party.The euphoria was thanks to Beijing's big-bang stimulus announcement on Tuesday, which showed the authorities' urgent and concerted commitment to boosting its ailing economy.Since Tuesday, Chinese authorities have flooded the market with announcements of interest rate cuts, bank reserve ratio reductions, liquidity injections, and pledges to boost fiscal spending. The stimulus blitz has jolted investors into buying into the previously downtrodden market."The ante has been upped on China stimulus. Forget just monetary 'bazooka,' Beijing is mobilizing the fiscal arsenal too," wrote Vishnu Varathan, Mizuho's head of macro research for Asia, excluding Japan, in a Friday note.He added that this is "as close as Beijing gets to guns blazing." And markets have reacted by swinging from "despondency to delirium."Mainland China's benchmark <a target="_blank" class="" href="https://markets.businessinsider.com/index/csi-300">CSI 300 index</a> closed 4.5% higher on Friday, its best week since November 2008.Meanwhile, Hong Kong's <a target="_blank" class="" href="https://markets.businessinsider.com/index/hang_seng">Hang Seng Index</a> closed 3.6% higher in its best performance since 2009.<h2 id="873d4d1f-efda-4b09-8baa-171092af49d4">The stock market party overwhelmed tech systems</h2>The stock market party got too hot to handle."Due to surging trading volume, the Shanghai exchange and brokers report some trades have been delayed," Hao Hong, chief economist at Grow Investment Group, <a target="_blank" class="" href="https://x.com/HAOHONG_CFA/status/1839498669864923621">posted on X.</a>"The trading system is simply overwhelmed. There is a huge stampede of stock bulls," added Hong.The <a target="_blank" class="" href="https://www.sse.com.cn/disclosure/announcement/general/c/c_20240927_10762480.shtml">Shanghai Stock Exchange</a> said in an announcement that it was investigating the delays.The market euphoria — now into its fourth day — came despite reservations about China's aggressive stimulus that it rolled out on Tuesday — which some analysts suggested <a target="_blank" class="" href="https://www.businessinsider.com/china-economy-stock-market-bazooka-liquidity-stimulus-sparks-panic-speculation-2024-9">panic in Beijing</a> over the state of the world's second-largest economy.China's economy has struggled to sustain its growth momentum since the pandemic ended. It is battling multiple challenges, including an epic property crisis, high youth unemployment, and deflation.While Chinese authorities have introduced support measures earlier, its stock markets couldn't sustain gains convincingly following a massive <a target="_blank" class="" href="https://markets.businessinsider.com/news/stocks/china-stock-market-meltdown-brutal-year-explainer-whats-happening-2024-1">meltdown</a> at the beginning of the year — a stark contrast to the hot money flowing elsewhere like the <a target="_blank" class="" href="https://www.businessinsider.com/stock-market-outlook-rally-sp500-recession-china-economy-interest-rates-2024-5">US, Japan, and India.</a>"Investors we spoke to generally have low conviction in the sustainability of the rally," acknowledged Bank of America analysts in a Friday note. However, the bank is more optimistic."Chinese financial regulators rarely encourage banks/financial institutions to increase leverage for the stock market but are doing so this time," the Bank of America analysts wrote, referring to Beijing's announcements of swap and re-lending facilities for stock buybacks.Furthermore, the US Federal Reserve has started cutting interest rates, which has historically benefited Chinese markets, they added.So even if Beijing's stimulus isn't enough for China's economy, a liquidity or leverage-driven market rally could still be "very powerful," they wrote.There's historical precedence, the Bank of America analysts added.The CSI 300 index more than doubled from the fourth quarter of 2014 to the first half of 2015 after Beijing used <a target="_blank" class="" href="https://www.businessinsider.com/china-mini-stimulus-2014-4">government stimulus</a> to arrest a slowdown. This preceded economic recovery that did not happen until the second half of 2016.<h2 id="a014ea6a-41e1-4a13-af63-bbc31fd09242">Top-down direction matters a lot in China</h2>Despite reservations about whether China's stimulus is enough — and if the current market rally is sustainable — it does look like Beijing is ready to do whatever it takes to revive its economy and markets.On Tuesday, <a target="_blank" class="" href="https://www.gov.cn/lianbo/fabu/202409/content_6976186.htm">People's Bank of China governor Pan Gongsheng</a> said at his stimulus announcement that authorities stand ready to inject more liquidity into the system if the support measures for swap and re-lending for share buybacks — collectively at $800 billion yuan, or $114 billion, prove successful."Indeed, while this isn't QE, moral suasion in China has somewhat more force than elsewhere. " wrote Global Data.TS Lombard economists Freya Beamish and Rory Green in a note on Thursday, referring to quantitative easing.After all, "Chinese companies live and die based on whether they are singled out as policy favorites, CEOs sometimes literally," they added.

China's stock markets are partying like it's 2008, overwhelming systems

<ul class="summary-list"><li>Rep. Alexandria Ocasio-Cortez and Sen. Tina Smith introduced a bill to build "social housing."</li><li>The HOMES Act would build and rehabilitate permanently affordable homes for low- and middle-income people.</li></ul>Politicians still agree: The rent is too damn high.Rep. Alexandria Ocasio-Cortez, a New York Democrat, and Sen. Tina Smith, a Minnesota Democrat, on Wednesday introduced <a target="_blank" class="" href="https://smithsenate.app.box.com/s/vwqs5o4oe5cl0ag4jchyp1piqsxrql50">legislation</a> in the House and Senate that would — if enacted — massively expand the nation's affordable housing stock.The HOMES Act would establish a new federal housing development authority charged with building and rehabilitating more than a million permanently affordable homes. These homes — for both renters and buyers — would be managed by local entities, including public and tribal housing authorities, cooperatives, tenant unions, nonprofits, and the like."There has been a lot of talk about building new housing in this country, but too often we don't talk about who will be building that new housing," Ocasio-Cortez said during <a target="_blank" class="" href="https://x.com/SenTinaSmith/status/1836472272481386676">a press conference</a> unveiling the legislation on Wednesday afternoon.While 40% of these homes would be reserved for extremely low-income residents and 30% for low-income households, about 30% would be available to middle-income households. This so-called "social housing" is notably different from traditional public housing, which is entirely reserved for the poorest households. Rent for all tenants in social housing would be capped at 25% of their income."Having middle-income tenants makes the financial model more viable. But also, importantly, having middle income tenants in these developments helps fight segregation. It helps build a constituency for this kind of housing," said Gianpaolo Baiocchi, director of New York University's Urban Democracy Lab and an advisor on the legislation.In a <a target="_blank" class="" href="https://www.nytimes.com/2024/09/18/opinion/aoc-tina-smith-housing.html">New York Times op-ed</a> unveiling their legislation, Ocasio-Cortez and Smith criticized the federal government's historical approach to ensuring lower-income Americans have access to affordable homes. They argued that federal funding — in the form of subsidies for developers, homeowners, and public housing — has too often propped up a for-profit market that doesn't serve the neediest."There is another way: social housing," Ocasio-Cortez and Smith said in their op-ed. "Instead of treating real estate as a commodity, we can underwrite the construction of millions of homes and apartments that, by law, must remain affordable."Baiocchi stressed that social housing would take all kinds of forms. "In some places it would look like public housing, in other places would be community land trusts, in other places it would be cooperatives," he said. About half of the 1.25 million homes would be new, while the other half would be purchased from private owners and redeveloped, Baiocchi said.The housing construction would be funded by "a combination of congressional spending and Treasury-backed loans, making financing resilient to the volatility of our housing market and the political winds of the annual appropriations process," Ocasio-Cortez and Smith wrote.Currently, rentals are hard to come by, with national vacancy rates at 6.6% in the second quarter of 2024.The legislation comes amid a progressive push for investments in social housing across the country. Baiocchi pointed to New York State Assemblymember Emily Gallagher's similar <a target="_blank" href="https://legislation.nysenate.gov/pdf/bills/2023/S8494">legislation</a> to create a state housing developer. And in California, lawmakers <a target="_blank" class="" href="https://a24.asmdc.org/press-releases/20240215-assemblymember-alex-lee-introduces-bill-create-social-housing-california">introduced a bill</a> to construct mixed-income social housing on government-owned land.Ocasio-Cortez and Smith also pointed to <a target="_blank" class="" href="https://www.nytimes.com/2023/05/23/magazine/vienna-social-housing.html">the social housing system in Vienna</a> as a model. Baiocchi said they looked to both European and Latin American examples.It's a particularly notable development as both presidential campaigns stake out their economic policies leading into the 2024 election. Vice President Kamala Harris has already proposed a housing plan to build 3 <a target="_blank" href="https://www.businessinsider.com/how-kamala-harris-plans-to-build-3-million-new-homes-2024-8">million additional new homes in her first term</a>, with tax incentives for builders creating starter homes; she's also proposed giving <a target="_blank" href="https://www.businessinsider.com/kamala-harris-economy-proposal-25k-first-time-homebuyers-down-payent-2024-8">first-time homebuyers $25,000</a> towards down payments.Former President Donald Trump <a target="_blank" href="https://rncplatform.donaldjtrump.com/?_gl=1*dndyww*_gcl_au*NzczNzk2NDcyLjE3MjQxNjA5MjI.&amp;_ga=2.111840580.1721597780.1726672440-392098144.1724160922">has proposed opening up federal land</a> to build new housing; the 2024 GOP platform says that he would "promote homeownership through Tax Incentives and support for first-time buyers, and cut unnecessary Regulations that raise housing costs."Any congressional proposals on housing costs — especially from legislators as prominent as Ocasio-Cortez and Smith — will likely attract increased attention in the run-up to a tight election. When reached for comment, the Harris-Walz campaign directed BI to their <a target="_blank" href="https://mailchi.mp/press.kamalaharris.com/vice-president-harris-lays-out-agenda-to-lower-costs-for-american-families">current housing proposals</a>. But the bill's proposal now signals that efforts to address housing costs could be top of mind for Democrats should they hold the White House.

A new housing plan wants to give middle-class Americans the kind of support typically reserved for low-income households

Mumbai, The <keyword id="6355302" type="General" weightage="20" keywordseo="rupee" source="Orion">rupee</keyword> depreciated by 8 paise to 82.74 against the US dollar in early trade on Friday, tracking a firm dollar against major rivals overseas. Analysts said, weak sentiment in the domestic equity market and elevated level of crude prices nearing USD 87 per barrel also weighed on the domestic unit. On Thursday, the <keyword id="6354335" type="General" weightage="80" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> in its bi-monthly monetary policy review decided to keep key interest rate unchanged, but hinted at tighter policy if food prices drive inflation higher. The American currency regained after US consumer price inflation showed moderation in July, raising hopes that the <keyword id="6356435" type="General" weightage="80" keywordseo="us-federal-reserve" source="Orion">US Federal Reserve</keyword> would pause rate hike. At the interbank foreign exchange market, the local unit opened at 82.75 against the US dollar and moved in a narrow range of 82.73 to 82.76. It later traded at 82.74 against the greenback, registering a fall of 8 paise from its previous close. On Thursday, the rupee rebounded 19 paise to close at 82.66 against the US dollar after the RBI asked banks to set aside a larger part of incremental deposits under the cash reserve ratio (CRR) as part of measures to take out excess liquidity from the banking system. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.05 per cent to 102.57. Global oil benchmark Brent crude was trading 0.02 per cent lower at USD 86.38 per barrel. In the domestic equity market, the 30-share BSE Sensex was trading 229.33 points or 0.35 per cent lower at 65,458.85. The broader NSE Nifty declined 76.05 points or 0.39 per cent to 19,467.05. Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday as they purchased shares worth Rs 331.22 crore, according to exchange data.

Rupee falls 8 paise to 82.74 against US dollar

<ul class="summary-list"><li>The US dollar's share in global forex reserves dropped to 55% from over 70% in 2000, per IMF data.</li><li>Non-traditional reserve currencies such as the Australian dollar and Canadian dollar are gaining ground.</li></ul>The US dollar is in a state of "stealth erosion," the <a target="_blank" href="https://www.imf.org/en/Blogs/Articles/2024/06/11/dollar-dominance-in-the-international-reserve-system-an-update">International Monetary Fund, or IMF,</a> wrote in a report on Tuesday.While the dollar is still by far the most dominant currency in the forex reserves of the world's central banks, the greenback's share in these reserves — after exchange-rate and interest-rate adjustments — declined from over 70% in 2000 to about 55% in the last quarter of 2023, according to <a target="_blank" href="https://data.imf.org/?sk=e6a5f467-c14b-4aa8-9f6d-5a09ec4e62a4">IMF's data.</a>The dollar has been strengthening against most currencies in recent years — indicating that private investors have moved into dollar-based assets. This effect masked the shift of central banks and governments out of dollar reserves.The <a target="_blank" href="https://markets.businessinsider.com/index/us-dollar-index">Dollar Index,</a> which measures the value of the greenback against a basket of foreign currencies, has gained 4% this year to date and about 7% since March 2022, when the US Federal Reserve started its last interest-rate hike cycle.<h2 id="94818c20-0ea9-4042-be56-e4f32b606cbf">Central banks have been 'shifting gradually' away from the USD</h2>The dollar's share hasn't been overtaken by the world's other three major currencies — the euro, the Japanese yen, or the UK pound sterling.Instead, the shares of "non-traditional reserve currencies" have risen, according to the IMF. These include the Australian dollar, Canadian dollar, Chinese renminbi, South Korean won, Singaporean dollar, and Nordic currencies.The IMF's findings are consistent with its previous report in 2022 when it found that the <a target="_blank" href="https://markets.businessinsider.com/news/currencies/dollar-dominance-shrinking-alternative-currencies-krona-won-more-attractive-imf-2022-6">dollar's dominance was waning</a> and getting replaced with alternative currencies."These nontraditional reserve currencies are attractive to reserve managers because they provide diversification and relatively attractive yields, and because they have become increasingly easy to buy, sell and hold with the development of new digital financial technologies," wrote IMF's economists in their latest report, which is based on data from 149 reporting economies that collectively account for 93% of global forex reserves.<h2 id="3eeaec01-92a5-456a-ad1d-04ecf22ae9b9">The dollar's decline in FX reserves doesn't appear to be about sanctions</h2>The IMF's report comes amid ongoing discussions about de-dollarization.With the use of sanctions, the West effectively shut Russia out of the global, greenback-based financial system after Moscow started the war in Ukraine.Other countries are now concerned that they, too, could be locked out of the US dollar-based financial system.However, the slow waning of the dollar's dominance in global forex reserves appears to be less about trade restrictions than diversification — because its decline has not accelerated in recent years despite the <a target="_blank" href="https://www.brookings.edu/wp-content/uploads/2024/05/20240528_ES_Sanctions_Harrell_Final.pdf">US' intensifying use of financial sanctions.</a>Even so, there are other concerns that may erode confidence in the greenback, analysts have said recently.On Monday, two American think tank analysts wrote in the <a target="_blank" rel=" nofollow" href="https://www.ft.com/content/293a7a58-3f14-426c-8b7f-fa0859054842">Financial Times</a> that <a target="_blank" rel="" href="https://markets.businessinsider.com/news/currencies/dedollarization-dollar-dominance-us-politics-economy-trade-fed-china-yuan-2024-6">"American dysfunction"</a> — political and fiscal — is the real threat to dollar dominance. This sentiment was also echoed by Jared Cohen, the president of global affairs at Goldman Sachs, in <a target="_blank" rel=" nofollow" href="https://foreignpolicy.com/2024/06/10/brics-currency-dollar-yuan-united-states-economy/">Foreign Policy.</a>

There's a 'stealth erosion' in global US dollar reserves, but there's no dominant replacement yet

Our experts answer readers' investing questions and write unbiased product reviews (<a href="https://www.businessinsider.com/personal-finance/investing-rating-methodology" class="not-content-link" target="_blank">here's how we assess investing products</a>). Paid non-client promotion: In some cases, we receive a commission from <a href="https://www.businessinsider.com/personal-finance/our-partners" class="not-content-link" target="_blank">our partners</a>. Our opinions are always our own.<ul class="summary-list"><li>Set by the Federal Reserve, the federal funds rate is the interest banks charge each other to borrow money overnight. </li><li>Changes in the federal funds rate influence the interest rates on loans, credit cards, and bank accounts.</li></ul>The major mandate of the <a href="https://www.businessinsider.com/personal-finance/what-is-the-federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> is to keep the US financial system solvent and manage its money supply (the amount of cash and readily available funds in circulation). It does this through a balancing act involving interest rates — specifically one called the federal funds rate. <h2>What is the federal funds rate?</h2>The federal funds rate (or fed funds rate, for short) is only used between banks. It's not an interest rate an individual can apply for or a financial account will earn. But it's a key benchmark. After the Fed sets it, the federal funds rate becomes a basis for interest charged on loans and credit card purchases, and the return offered by <a href="https://www.businessinsider.com/personal-finance/what-is-fixed-income-investing" target="_blank" rel="noopener">fixed-income investments</a>, like bonds and <a href="https://www.businessinsider.com/personal-finance/what-is-an-annuity" target="_blank" rel="noopener">annuities</a>. The level of interest rates — how cheap or expensive it is to borrow money — affects business and consumer spending. So, through the federal funds rate, the Fed tries to keep the entire economy on course. Here's how it works, and the ways it can affect you.<h2>How does the federal funds rate work?</h2>The federal funds rate, also known as the overnight rate, is the interest commercial banks charge when they lend money to one another for extremely short-term periods — literally, overnight. The Fed mandates this activity between banks to ensure they meet their reserve requirements. That is, it requires each bank to maintain enough cash on hand, plus a reserve balance with the central bank, to cover a certain percentage of its deposits and other liabilities on every business day. These regulations are to make sure that a bank's account-holders always have ready access to their money. If banks are short on funds to maintain their reserve requirement, they borrow from another — at (or very close to) the fed funds rate.There are two types of federal funds rates:<ol><li>The federal funds effective rate is the weighted average of all the interest rates banks pay when they borrow from other banks in the country.</li><li>The federal funds target rate is the rate set by the Federal Open Market Committee (FOMC), the Fed's monetary policy-making body, to serve as the guidepost for what banks charge one another. Made up of the Fed's Board of Governors and five regional Federal Reserve Bank presidents, the FOMC meets at least eight times a year to decide the federal funds rate based on prevailing economic conditions.</li></ol>When people refer to the Fed "slashing the interest rate" or "raising interest rates," they usually mean the federal funds target rate.Get Exclusive Savings with RaisinOpen one of the<a href="https://www.businessinsider.com/personal-finance/best-high-yield-savings-accounts-rates-right-now"> best savings accounts</a> with a no-fee<a href="https://www.businessinsider.com/personal-finance/raisin-review"> Raisin</a> account in minutes and spread your savings across an exclusive network of over 30 FDIC-insured banks and NCUA-insured credit unions. Earn top savings rates and manage it all with a single secure login.<h2>How does the federal funds rate affect the economy?</h2>During its eight meetings a year, the FOMC can raise, lower, or keep the fed funds rate the same. But what motivates the committee to periodically change it? How does the Fed use it as an economy-adjusting tool?When it needs to stimulate economic growth — production, spending, expansion — the Fed lowers the fed funds rate. This move makes it cheaper for banks to borrow money and maintain their reserves. So these banks can then lend out their extra funds at lower costs, encouraging companies and individuals to borrow to expand, invest, and buy things. It increases the money supply in the system, in technical terms.In contrast, when the Fed needs to slow down the economy — say, because prices are climbing too fast, causing rampant inflation — it raises the fed funds rate. To prevent their required reserve balance from going into the red, member banks have to pay more interest. They then raise their interest rates to clients, which tends to slow down any form of borrowing activity. When banks don't finance as much, the money supply contracts, and economic growth goes back to more sustainable levels. <h2>How does the federal funds rate affect you?</h2>The federal funds rate is an interbank interest rate. But it has a ripple effect throughout people's financial lives, the interest they pay, and the money they earn. Among its effects:<ul><li>Prime rate: How the fed funds rate moves influences the movement of a number of interest rates, one of the most significant being the <a href="https://www.businessinsider.com/personal-finance/what-is-the-prime-rate" target="_blank" rel="noopener">prime rate</a>. The prime rate is the rate a bank can offer its best corporate or high-net-worth individual clients. </li><li>Consumer loans and accounts: A shift in the prime rate influences consumer interest rates as well. When the prime rate rises or drops, you can expect a corresponding adjustment on the monthly charges of your personal loans, credit cards, and <a href="https://www.businessinsider.com/personal-finance/how-does-fed-impact-mortgage-rates">adjustable-rate mortgages</a>. If they pay fluctuating interest, your bank accounts and CDs also earn more or less.</li><li>US Treasuries and other bonds: Changes in the fed funds rate can be paralleled in the interest rates paid by newly issued <a href="https://www.businessinsider.com/personal-finance/how-to-buy-treasury-bonds" target="_blank" rel="noopener">Treasury notes and bonds</a>. These in turn serve as a benchmark for <a href="https://www.businessinsider.com/personal-finance/what-is-a-corporate-bond" target="_blank" rel="noopener">corporate bond</a> rates. </li><li>Stocks: A decrease in the feds fund rate can send <a href="https://www.businessinsider.com/personal-finance/best-stock-trading-apps">stocks</a> soaring, while an increase can push the market to decline. </li><li>Employment: When interest rates go down, it encourages consumers to buy more goods and services. In turn, this propels businesses to meet the demand by expanding production, hiring more workers, and raising wages.</li></ul><h2>Federal funds rate FAQs</h2><h3 class="faq-question">What happens when the federal funds rate is high?</h3>High fed funds rates make all kinds of borrowing costs more expensive. The interest rates on everything from mortgages to credit cards and auto loans are all influenced by the federal funds rate.<h3 class="faq-question">Is the federal funds rate the same as the prime rate?</h3>The prime rate is the interest rate that banks charge their most creditworthy clients. It is usually about 3% above the federal funds rate.<h3 class="faq-question">Who sets the federal funds rate?</h3>The Federal Open Market Committee (FOMC), the Fed's monetary policy-making body, sets the federal funds rate. Members meet once about every six weeks to discuss economic conditions and decide whether to increase, decrease, or leave the federal funds rate unchanged.

What is the federal funds rate?

<ul class="summary-list"><li>Fed policymakers weren't concerned about FTX's impact on financial markets outside of crypto, according to minutes from their December meeting. </li><li>But they acknowledged that FTX's collapse weighed on the digital asset sector. </li></ul>The implosion of crypto exchange FTX has shaken the digital asset industry, but the contagion isn't threatening broader financial markets, according to Federal Reserve policymakers."While the spillovers from this situation had been significant among other crypto lenders and exchanges, the collapse was not seen as posing broader market risks to the financial system," <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20221214.pdf" target="_blank" rel="nofollow noopener">minutes</a> from the Fed's December meeting show. FTX's fallout sparked a run on Silvergate Capital, forcing the bank to sell assets at a loss in an attempt to cover roughly $8.1 billion in withdrawals, <a href="https://www.wsj.com/articles/silvergate-raced-to-cover-8-1-billion-in-withdrawals-during-crypto-meltdown-11672895207" target="_blank" rel="noopener">according to the Wall Street Journal</a>.Meanwhile, the Winklevoss-run Gemini has said Genesis, the lending arm of DCG, owes $900 million to the crypto exchange's clients. The spat comes after Genesis halted customer withdrawals shortly after FTX filed for bankruptcy.While the Fed remains confident that FTX's collapse isn't having knock-on effects beyond crypto, Sens. Elizabeth Warren and Tina Smith sent letters last month to the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency asking about close ties between crypto markets and traditional banks.FTX filed for bankruptcy in November amid a liquidity crisis and reports that it transferred billions of dollars of client funds to founder Sam Bankman-Fried's crypto hedge fund Alameda Research. Meanwhile, <a href="https://markets.businessinsider.com/news/currencies/ftx-timeline-sam-bankman-fried-bankruptcy-trial-alameda-sec-doj-2023-1">Bankman-Fried</a> pled not guilty to fraud charges on Tuesday, a day before the release of the Fed minutes. He is set to stand trial in October to face laundering and fraud charges.If he is convicted on all counts, he could see up to 115 years in prison.

FTX's crash has sparked contagion throughout the crypto sector, but the Federal Reserve doesn't consider it a risk to the broader financial system

<ul class="summary-list"><li>Wall Street trade groups are pushing back against the possibility of a digital dollar from the <keyword id="11895523" type="UNKNOWN" weightage="60" keywordseo="federal-reserve" source="Orion">Federal Reserve</keyword>.</li><li>The American Bankers Association said a central bank digital currency would "rewire our banking and financial system."</li></ul>Wall Street banks are pushing back against a potential digital currency from the Federal Reserve, arguing that it would take away capital from the banking system in a time economic uncertainty. Fed officials have been <a href="https://www.federalreserve.gov/central-bank-digital-currency.htm">studying a digital dollar</a> but have yet to propose creating one. Still, the banking industry isn't waiting to weigh in.The <a href="https://www.aba.com/advocacy/policy-analysis/aba-comments-on-fed-discussion-paper-money-and-payments#_ga=2.21158523.1753506[…]-1098285224.1648046196">American Bankers Association published a letter</a> Friday warning that a central bank digital currency would "rewire our banking and financial system." And even if <keyword id="6791630" type="UNKNOWN" weightage="60" keywordseo="cbdc" source="Orion">CBDC</keyword> accounts were capped at $5,000 per user, they would drain in $720 billion in deposits, or 71% of bank funding, the <keyword id="14019580" type="UNKNOWN" weightage="60" keywordseo="aba" source="Orion">ABA</keyword> estimated. "The purported benefits of a CBDC are uncertain and unlikely to be realized, while the costs are real and acute. Based on this analysis, we do not see a compelling case for a CBDC in the United States today," the letter said.Digital currency debates have only heightened in recent months as the <keyword id="11892695" type="UNKNOWN" weightage="60" keywordseo="cryptocurrency" source="Orion">cryptocurrency</keyword> market cap has shrunk from a high of $3 trillion in November to $1.2 trillion now. The recent stablecoin debacle has further raised concerns among regulators and the Biden administration about digital tokens.The ABA added that the dollar is already largely digital in the US and globally, through payment systems like Venmo and CashApp. A CBDC could lead to massive shifts of capital away from traditional banking systems, it said. "Losing this critical funding source would undermine the economics of the banking business model, severely restricting credit availability," the ABA said. In a separate letter, also on Friday, the <a href="https://bpi.com/central-bank-digital-currencys-path-forward-in-the-u-s-is-simple-make-decisions-based-on-data/">Bank Policy Institute</a> echoed the ABA's sentiments, saying that a digital dollar would jeopardize banking institutions and customers while also restricting credit availability and raising loan costs.

Wall Street lobbies are bashing the idea of a digital dollar from the Fed and say the move would drain money from the US banking system

<ul class="summary-list"><li>A US digital dollar could someday operate alongside <keyword id="11931190" type="UNKNOWN" weightage="60" keywordseo="stablecoins" source="Orion">stablecoins</keyword>, Fed Vice Chair Lael Brainard said Thursday. </li><li>Her Capitol Hill testimony followed an eruption in the cryptocurrency market surrounding the collapse of algorithmic stablecoin terraUSD. </li></ul>A digitized <keyword id="6368584" type="UNKNOWN" weightage="60" keywordseo="us-dollar" source="Orion">US dollar</keyword> could someday operate alongside stablecoins, <keyword id="11895523" type="UNKNOWN" weightage="60" keywordseo="federal-reserve" source="Orion">Federal Reserve</keyword> Vice Chair Lael Brainard told lawmakers on Thursday, after the cryptocurrency market was roiled earlier this month when privately issued stablecoins lost their pegs to the dollar. "In some future circumstances, <keyword id="6791630" type="UNKNOWN" weightage="60" keywordseo="cbdc" source="Orion">CBDC</keyword> could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money," <a href="https://www.federalreserve.gov/newsevents/testimony/brainard20220526a.htm">Brainard said in prepared remarks</a> for testimony on Capitol Hill. A CBDC is a digital banknote issued by a central bank. There's been "explosive growth" in an emergent digital financial system, and if private monies, in the form of either stablecoins or <keyword id="11895317" type="UNKNOWN" weightage="60" keywordseo="cryptocurrencies" source="Orion">cryptocurrencies</keyword>, were to become widespread, there could be fragmentation of the US payment system into so-called walled gardens, she said. Brainard, who in April won Senate confirmation for a four-year term as the central bank's vice chair, <a href="https://www.youtube.com/watch?v=zkPq0I1cS2c">testified before the House Financial Services Committee</a>.Stablecoins have been a hot topic in the financial <keyword id="11893875" type="UNKNOWN" weightage="100" keywordseo="markets" source="Orion">markets</keyword>, particularly in recent days as investors watched the collapse of <a href="https://markets.businessinsider.com/news/currencies/stablecoin-cryptocurrency-crash-terra-luna-usdt-tether-usdc-altcoins-investing-2022-5?utm_medium=ingest&amp;utm_source=markets">algorithmic stablecoin terraUSD and its sister coin luna</a>. <keyword id="12507550" type="UNKNOWN" weightage="60" keywordseo="terra" source="Orion">Terra</keyword> earlier this month lost its peg to the US dollar and the <a href="https://markets.businessinsider.com/news/currencies/crypto-terra-luna-tether-stablecoins-bitcoin-dollar-pegs-regulation-markets-2022-5">market's turbulence spread to stablecoin Tether</a>, sending the market's third most valuable cryptocurrency briefly below its $1 peg before it regained parity. News came Thursday that Terra supporters voted to approve founder Do Kwon's plan for a new blockchain for its luna cryptocurrency, without <a href="https://markets.businessinsider.com/news/currencies/terra-backers-keep-luna-alive-abandon-stablecoin-ust-crypto-crash-2022-5">reviving the failed terraUSD</a>."The recent turmoil in crypto financial markets makes clear that the actions we take now—whether on the regulatory framework or a digital dollar—should be robust to the future evolution of the financial system," said Brainard. The Federal Reserve in January <a href="https://www.businessinsider.com/federal-reserve-digital-dollar-cryptocurrency-central-bank-digital-currency-report-2022-1">published a report</a> laying out the potential benefits and risks of fully digitizing the US dollar but hasn't sided for or against a CBDC. The US dollar is the most widely used currency in international payments and investments, and Brainard said US officials should consider how the potential absence or presence of a US CBDC could affect the usage of the dollar in global payments. "A US CBDC may be one potential way to ensure that people around the world who use the dollar can continue to rely on the strength and safety of the US currency to transact and conduct business in the digital financial system," she said.

Stablecoins could exist alongside a digital dollar as CBDCs could help secure global payments systems, Fed Vice Chair Lael Brainard says

<ul class="summary-list"><li>Mark Cuban pleaded with the Federal Reserve to buy the debt of SVB Financial Group.</li><li>The "Shark Tank" investor said failure to do so would affect confidence in the financial sector.</li></ul>Billionaire investor Mark Cuban has pleaded with the Federal Reserve to step in and buy Silicon Valley Bank's debt to save thousands of startups and prevent banking contagion.SVB <a href="https://markets.businessinsider.com/news/stocks/silicon-valley-bank-failure-fdic-wall-street-regulator-finance-investing-2023-3">was shut down by regulators Friday</a> after a $2.1 billion stock sale failed following a $1.8 billion loss on a fixed-bond offering.<a href="https://twitter.com/mcuban/status/1634413306948603905" target="_blank" rel="noopener">In a Twitter thread</a>, "Shark Tank" star Cuban called on the Fed to step in and buy any debt belonging to SVB to prevent a run on deposits. "The Fed should IMMEDIATELY buy all the securities/debt the bank owns at near par, which should be enough to cover most deposits. Any losses paid for in equity and new debt from the new bank or whoever buys it. The Fed knew this was a risk. They should own it," he wrote.Cuban added that if the Fed didn't act, trust in the banking system would become an issue.SVB's collapse is one of the most significant events in the sector since the 2007/08 global financial crisis.The bank fell victim to the rapid rise in interest rates in the past 12 months, which hurt SVB's bond offering. Meanwhile, higher rates have hamstrung fundraising attempts among its startup customer base, sparking withdrawals.<a href="https://www.businessinsider.com/silicon-valley-bank-svb-particularly-scary-bank-failure-why-2023-3">The lender</a> had funded nearly half of US startups, <a href="https://www.svb.com/venture-funded" target="_blank" rel="noopener">according to its website</a>. Cuban's tweet added to calls from Bill Ackman for the US government to commit to a <a href="https://www.businessinsider.com/silicon-valley-bank-bill-ackman-billionaire-government-bailout-svb-2023-3">"highly dilutive" bailout</a> of the failed bank to prevent a domino effect on the rest of the banking sector.Cuban said a Fed purchase of SVB debt wouldn't constitute a bailout."The Fed effectively is providing cash to end the run, and in return getting long-dated assets that will pay at maturity, and for the risk assets, should offer some positive return as well," he tweeted. "SVB didn't buy failing assets. No run, and they survive."<a href="https://twitter.com/mcuban/status/1634427092824629251" target="_blank" rel="noopener">In a later tweet</a>, Cuban said the Fed should be mindful of the thousands of companies that borrowed from SVB and were required to keep their cash with it."Those entrepreneurs and their employees and vendors are feeling the pain. And they are who the Fed should protect," he wrote.<a href="https://twitter.com/mcuban/status/1634420838479831042" target="_blank" rel="noopener">Cuban added in another tweet:</a> "And for the record I have zero personal funds there , although several of my portfolio companies do. Probably all in about 8 to 10m dollars. So I can help them. But it's the other 200b and how many employees and vendors ? I'm concerned about them."<a href="https://twitter.com/mcuban/status/1634420838479831042" target="_blank" rel="noopener"></a>

Mark Cuban called on the Federal Reserve to step in and buy Silicon Valley Bank's debt 'to end the run'

The current retail inflationary pressures are expected to ease with fresh Kharif arrivals and a pass-through of lower input costs to consumers - also affirmed by <keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword>'s inflation projections for the next two quarters, the monthly economic review for October compiled by the department of economic affairs said. On inflation, the report by the department of economic affairs said domestic prices of some food items have gone up in the wake of the rise in international prices. <keyword id="3658" type="General" weightage="80" keywordseo="india" source="Orion">India</keyword>'s grain availability was impacted by the untimely heatwaves and deficiency of the southwest monsoon in the current year. However, export restrictions have ensured that the country's needs are fully met. The department of economic affairs in its report said India's food security has remained intact. Sharp rise in tractor sales in September and October also point towards improved sentiments and an expected increase in crop area sown. The report also indicated the UNDP Multi-Dimensional Poverty Index (MPI) released in October 2022 showed 41.5 crore people exiting multidimensional poverty in India during the last 15 years. India's success in reducing poverty has also contributed to a decline in poverty in South Asia with South Asia no longer remaining the most multi-dimensionally poor region. The report also deals with a global outlook, inflation, food security, poverty, health and employment and <keyword id="6354507" type="General" weightage="80" keywordseo="world" source="Orion">World</keyword> and monetary policy. On domestic inflation, the report said consumer price index (CPI) inflation was largely driven by food inflation with major contributors being imported food items like oil and fats during the first five months of 2022. Since June 2022 however, domestic seasonal factors have increased the inflation of vegetables, cereals and their products, which have contributed to elevating food inflation. On the global outlook, the department of economic affairs said the prospect of a global economic slowdown had led to an outflow of portfolio investments from most countries into safe-haven US treasuries. This, combined with higher policy rates deployed by the <keyword id="6355253" type="General" weightage="50" keywordseo="federal-reserve" source="Orion">Federal Reserve</keyword> to counter inflation, has significantly strengthened the US dollar vis-a-vis other currencies. According to the report, the depreciation of most currencies has also led to a global drawdown of foreign exchange reserves to protect their values and prevent volatility in the foreign exchange market. On food security, the report said global food security has deteriorated and India may turn out to be an outlier with proactive and pre-emptive government interventions. 2022 brought to the forefront not only the issues of macroeconomic and geopolitical risks but also the vulnerability and interconnectedness of the global food system to shocks. The geopolitical conflict and climatic events have moved the focus to the issues of fragility and over-dependence on a few countries or regions for global food security. The report said, "Russia and Ukraine are among the most important producers of essential agricultural commodities, including wheat, maize, sunflower seeds and inputs like fertilisers. Together with other countries bordering the <keyword id="391209" type="General" weightage="80" keywordseo="black-sea" source="Orion">Black Sea</keyword>, they constitute the world's breadbasket." The Black Sea serves as a critical supply and transit hub to move food commodities from these countries to the rest of the world. As the conflict choked the hub, the movement of food items from these countries to the rest of the world got affected, threatening people's livelihoods directly/indirectly connected with the food business in the Black Sea region. Rising economic activity has led to a decline in the unemployment rate, the department of economic affairs wrote in the report. With the recovery in economic activities across sectors, the overall employment situation has also improved, overcoming the impact of the pandemic. It added that the Periodic Labour Force Survey (PLFS) shows the urban unemployment rate for people aged 15 years and above declining from 12.6 per cent in the quarter ending June 2021 to 7.6 per cent one year later (quarter ending June 2022). This is accompanied by an improvement in the labour force participation rate (LFPR) as well, reflecting that by the time the current year was one-quarter over, the economy had come out of the grip of the Covid-19-induced slowdown, according to the monthly review. In a world where monetary tightening has weakened growth prospects, the finance ministry said India appears well-placed to grow at a moderately brisk rate in the coming years on account of the priority it accorded macroeconomic stability. It added the financial system stress in the second decade of the millennium, a consequence of the lending boom witnessed in the first decade-plus, is now behind us. It also added that private sector financial and non-financial balance sheets are healthy and incipient signs of a new personal sector capital formation cycle are visible. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/rupee-gains-16-paise-to-81-54-against-us-dollar/articleshow/95758455.cms">Rupee gains 16 paise to 81.54 against US dollar</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/delhi-hc-grants-bail-to-yes-bank-co-founder-rana-kapoor-in-rs-466-51-cr-money-laundering-case/articleshow/95760025.cms">Delhi HC grants bail to Yes Bank co-founder Rana Kapoor in Rs 466.51 cr money laundering case</a>

Retail inflationary pressures expected to ease with fresh Kharif arrivals: Finance Ministry

<ul class="summary-list"><li>Dysfunctioning US bond markets run the risk of undermining central bank monetary policy, according to John Williams. </li><li>The New York Federal Reserve president told a conference the financial system must be strengthened. </li></ul>Dysfunctioning US bond markets run the risk of undermining central bank monetary policy, according to New York Federal Reserve President John Williams. While speaking Wednesday at conference hosted by the New York Fed about the Treasury market, he reiterated the Fed's priority to stay aggressive in its efforts to tame inflation and find ways to strengthen the financial system in the process."For monetary policy to be most effective, financial markets must function properly," Williams said, <a href="https://www.ft.com/content/347a2895-36ef-416a-987d-cef040404a14">according to the Financial Times</a>. "Monetary policy influences the economy by affecting financial conditions, with the Treasury market at the center of it all. If the Treasury market isn't functioning well, it can impede the transmission of monetary policy to the economy."Williams' comments come as a liquidity crunch takes hold of the $24 trillion Treasury market and threatens to grind the world's most vital bond market to a halt.Bond yields have seen big swings as a lack of liquidity has widened the price gaps between investors buying and selling Treasuries. That means trades that didn't move the market before are now creating more volatility.And big institutions are less inclined to serve as Treasury market-makers, as the so-called supplementary leverage ratio requires them to put up more capital and boost their reserves.Treasury Secretary Janet Yellen acknowledged last month the possibility of buybacks after her department surveyed dealers of Treasuries about a potential program.At the conference Wednesday, Nellie Liang, the under secretary of domestic finance at the Treasury Department, proposed new transparency measures on the most widely traded Treasury bonds to improve investor confidence and help regulators spot squeezes earlier.

Treasury market liquidity crunch could derail the Federal Reserve's policy, New York Fed chief says

<keyword id="48211" type="ORGANIZATION" weightage="20" keywordseo="US-stocks">US stocks</keyword> finished lower as shares of big tech names struggled, weighing on the market. On Friday, the <keyword id="70622" type="ORGANIZATION" weightage="20" keywordseo="Dow-Jones-Industrial-Average">Dow Jones Industrial Average</keyword> slipped 130.40 points, or 0.47 per cent, to 27,901.98. The S&amp;P 500 fell 28.48 points, or 0.84 per cent, to 3,357.01. The <keyword id="165439" type="ORGANIZATION" weightage="20" keywordseo="Nasdaq-Composite-Index">Nasdaq Composite Index</keyword> decreased 140.19 points, or 1.27 per cent, to 10,910.28, Xinhua news agency reported. Shares of major US tech giants such as Facebook, Apple, Amazon, Netflix and Google-parent Alphabet all closed lower. Of the S&amp;P 500 sector level, communication services and technology dipped 1.84 per cent and 0.84 per cent, respectively, among the worst performers. US-listed Chinese companies traded mostly lower, with six of the top 10 stocks by weight in the S&amp;P US Listed China 50 index ending the day on a downbeat note. The moves came after data showed jobless claims in the United States declined only slightly last week. US initial jobless claims, a rough way to measure layoffs, came in at 860,000 in the week ending September 12, following an upwardly revised level of 893,000 in the prior week, the Department of Labor reported Thursday. The reading slightly exceeded the median economist estimate of 850,000 compiled by Bloomberg. Continuing claims, or the number of people already receiving benefits, stood at 12.63 million for the week ending September 5, showed the report. Wall Street also digested <keyword id="1860048" type="COMPANY" weightage="20" keywordseo="The-Federal-Reserve">the Federal Reserve</keyword>'s latest decision on monetary policy. The US central bank on Wednesday held its benchmark interest rate steady at the record-low level of near zero and promised to maintain this target range until labour market conditions have improved to reach maximum employment and inflation has picked up to its desirable level. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/top-stocks-to-watch-dr-reddys-laboratories-hdfc-bank-tvs-motor-vedanta-irctc-lt-bharat-forge-hal-and-more/articleshow/78179393.cms" data-type="tilCustomLink">Top stocks to watch— Dr Reddy's Laboratories, HDFC Bank, TVS Motor, Vedanta, IRCTC, L&amp;T, Bharat Forge, HAL, and more</a> <a href="https://www.businessinsider.in/tech/news/apple-store-online-to-launch-in-india-on-september-23-weeks-ahead-of-diwali/articleshow/78179322.cms" data-type="tilCustomLink">Apple Store Online to launch in India on September 23, weeks ahead of Diwali</a>

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